When should you leave your day job to open a start-up?

Question

I am thinking of opening my own start-up but my friends & family always advise me to do my freelance projects parallel for sometime and then leave my day job.

My argument is: I am not able to give 100% to my freelance work becuase of my full-time day job, hence my freelancing work is affected and sometimes I feel that I don't have it in me.

Am I just running away from reality? Is it possible for you to give your 100% at both places? If yes how do you concentrate since work at both places is equally challenging?

Answer 1

do you have a customer or customers who will equal or exceed your current income including insurance, taxes, etc.?

how much risk are you and your family prepared to take? how much money do you have saved?

freelancing full-time is rewarding, as is starting your own company, but it will be (a) more work than you think and (b) a strain on your finances and family

ideally, build a product on the side and when sales of the product exceed your day-job income, then quit the day job. This rarely happens, but it can happen. It is also a safer way to learn about business.

good luck!

Answer 2

I would advise strongly, especially given the economic climate right now, to hold onto what is secure. Being on your own (almost 8 years for me now) is not all it is cracked up to be. Cash flow management is a big challenge and getting the respect of a firm when your client knows it is just you working from home is also a great challenge people take for granted. You probably need, in this current climate - 1 year of savings. I know people say 6 months and such but I think times will be tough for a bit and it is about more than paying the bills between jobs. I often will do a job that takes 6 or 8 weeks and then not get paid for 4+ months. It is not uncommon. How will you handle it when you do a couple months for a startup and they string you along and then go chapter 11. It happens, more that you would think.

My best advice is to find the client who will give you a healthy long term contract and use that as a bridge out of full time employment. That is how I made the jump and it was pretty successful. Most people fail in that first year because they just do it cold turkey, dont build it and hope they will come - this isnt baseball in a cornfield, get them to come first.

Answer 3

I gave up my day job to start work as a contract programmer. I was definitely not able to work in parallel because I am working full time at another company, but when I was full time I took side jobs. Those side jobs were accepted with the understanding that it would be done in the evening/weekend and that was ok with my customers.

I basically lost a good chunk of my social life in exchange for the additional cash ... was it worth it ... since I was single ... yeah the extra money was good ... but if I were married I'd probably rethink my stance.

Full time contracting is good work and good pay but you run the risk of going for an extended period without a job, even more so in today's economy. I'm forever mulling over the idea of going full time in-house at my current company when my contract comes due. My decision will depend on the availability of new contracts and a number of personal factors.

So to answer your question ... yes you can give 100% at both places .... with the understanding that your 100% for the freelance work will come in the evenings and weekends and you'll have to sacrifice some social/family life to do so.

Hope this helps and best of luck ! Scott Vercuski

Answer 4

You need to make sure you can support yourself doing freelance work.

I'd advise you to build up a bankroll first that could support you during the transition period. Having an established client-base would help tremendously too, especially if you can constantly perform small maintenance and upgrade work for them.

If you don't have strong marketing skills, consider pairing up with a strong marketing guy. In general, sharing the load with one or two more talented individual will raise your chances of success by several factors.

I've founded my own company last company with two other partners, and let me tell you - it's a heck of a ride. If you're determined and prepared for some hardships, you'll find starting your own business to be a very worthwhile experience.

A couple of books I'd recommend reading are The Art Of The Start (Guy Kawasaki) and Good To Great (Jim Collins).

Answer 5

I would agree with what everyone else has suggested. There is a great podcast series on microISV's (recommeded by Joel & Jeff in the SO Pod Cast #33) and starting up your company. There is an episode that directly addresses this question here

Answer 6

Firstly, do you have a family? And by family, I really mean dependents. In other words, if you do have a spouse, can she/he get by without any substantial income provided by you? If no, then yeah, you need to keep a "real" job that provides stable income. If you have children, then the answer is pretty obvious.

If you are single or have a working spouse and no kids, then I'm going to go against some of the others here and say dive right in and go for it. If you have even something like $5-10k saved, you should be able to survive on that for a couple of months if you scrimp. Or you could consider some angel/seed funding a la the popular Y Combinator route.

The reason being is that in times of an economic downturn, everyone will recommend you avoid taking risk. However, this means that you will have fewer and fewer competitors and your odds of getting a bigger payoff increase. The common advice is to see what the crowds are doing, and do the opposite.

You hit the nail on the head in that you won't be able to focus 100% on your baby if you have a day job. I'm kind of in a similar boat, and my project is going by agonizingly slow.

Bottom line is that even if your startup fails, you'll have a significant advantage on a resume that others do not: you created and ran a company. Provided you are talented (and if you can get a company off the ground and release a product, you probably are), getting a job to pay back whatever debt you incurred, even in these times, is not that difficult.

Answer 7

You should do it if you have more money than common sense. The thing about a startup is that it takes a while to start up. If possible, try to do as much as you can in parallel with the job that pays the bills. You will hit a point where you will know if your side venture can be a primary source of income. In these economic times, finding investors is a tough task, so I would tread with caution.

Answer 8

There's plenty of options and great advice already mentioned. You may consider doing contract work via a staffing agency, which can be a huge help. It's what I currently do, in addition to working on personal projects.

A book I like which offers some great guidance is The Tipping Point, by Malcolm Gladwell.

Answer 9

When should you leave your day job to open a start-up?

When you get laid off. Seriously, at the moment, if you have a steady job you might as well hang on, at least for a year or so. If you get laid off, though, you'll find yourself with spare time and (hopefully) some compensation pay to tide you over for a while - the perfect opportunity to start out on your own. I'm starting to think that's why we'll never get away from the boom-and-bust cycle - a bust always leaves a bunch of people around who'll start to innovate out of necessity, feeding the next boom.

Answer 10

If you're living in the US, the horrible health insurance system means that you also have to be extremely healthy or your spouse has to work for a stable job with no risk of getting fired, so you can stay on the group plan.

To me that's one of the reasons to seek a job in a company, so I got that security compared to worrying about month-to-month payments and the possibility of getting dropped.

I miss single-payer national health insurance.

Answer 11

One often overlooked point is that within a company there exists an entire infrastructure to support the talent--to support support you in whatever guru role you are in. Building the software that people need is one component, getting the software into the hands of the people that need it is another, and convincing people that they need your automated sprocket widgetizer may be yet another large component of the whole package.

Joel Spolsky explores these concepts quite well in "The Development Abstraction Layer".

It's hard to say whether/when one should go it alone, but it should be done with open eyes and lots of determination. Many sources cite determination as a primary factor in freelance success--the kind of determination where you won't let anything stand in your way (even a current full time job) and you feel that determination confidently going in.

Best of luck in whatever your decision is.

Answer 12

Thanks for such good advice.

After Reading all the comments, I think I will continue to work in parallel for now. At least untill I get some steady income. As the work load increases, I will reevaluate where I'm at and hopefully be able to say good bye to the day job.

Although I don't have any dependents that rely on me, there are some other benefits to staying where I'm at for now:

• My job is very very secure (rare in these times), where I am still learning new things.
• It pays very well (above market avg)
• I'm able to save more money.

Thanks again guys.

Answer 13

I thought I would play devils advocate when it comes to the startup question.

Many, many of our major tech companies were started in the middle of a recession. Inc. Magazines article, Defying Gravity, talks about a lot of major companies that took flight in the middle of economic hardship (Microsoft included!). I have read another article before that discussed this topic in even greater length about how a recession was counter-intuitively the prime time to create your startup.

If you have kids and a wife, make sure they are taken care of. If you can still pull off a major cut in house-hold income and get by for awhile it might pay dividends in the end (literally) if you pursue your company.

Answer 14

Are you looking to start a PRODUCT company or a Customer Software Engineering (consultant) business?

I.e., selling a product or selling your time?

If it's the latter, you should be prepared to work 60 hour weeks for a while (6 months to a year). Most folks I know who run their own software product company (like myself) don't need to work more than 40 hours, but I think you have to be willing to for a short time.

And if you are prepared for that then:

1. Cut back all your expenses.
2. Save enough money so that at your new "burn rate" you have a year of money.
3. Get your product at least to early alpha and get your first Stranger Money (sale to someone who doesn't already know you), and ideally several of those sales. That'll prove that you have a viable product.
4. Do the above working 40 hours for "the man" and 20 hours (per week) on your own product. If you can't handle that then you probably honestly aren't ready for the stress of running your own business.

All of this will help you during those dark hours when you've put 200 hours into the product and you're doubting yourself.

Read my answer (and others) in a related post: http://stackoverflow.com/questions/263723/developing-a-software-idea-into-a-business

And lastly, I'll echo the words of a great marketer when asked "what advice would you have for your child considering entrepreneurship".

"One word: Start"

Answer 15

I've been where you are at.

For your freelance + job question...If you know yourself as someone that is good with time management, very resourceful, and very effective.. then maybe it could work doing both @ 100% quality.

But think seriously about your life now, what's important to you. Doing this will likely absolutely consume your life. Is there a girlfriend depending on you to spend time with them? If so, be prepared to upset her and create lots of problems in the relationship. Of course that depends on the relationship.

Now, really... to know whether you are READY to do a startup.. the best way is to work on your plan and create some proof of concept for yourself (and for investors if you need them). Stay @ your job if its not too much suffering until you can minimize the risk of failure to the point that you can say.. "YES, there is a high chance that customers will buy what I am selling at this price.. I have proof right here". That is the best time to quit your job and go for it.. because you are making a calculated bet.

Now, if you don't need to support yourself, or support another.. ie. someone else can pay for your bills and feed you, and give you some money to socialize.. then there is little downside to quitting and doing your own thing. Just make sure you quit respectfully and honestly.. most employers will respect that and admire you for it.

I spoke to a top VC in san fran one time, and he said the fastest way to accelerate towards the goal of being a successful entrepreneur is to get down and dirty. Not by being in a company doing a very focused specific job.

One thing... don't let the whole economic downturn bother you.. There is so much opportunity out there.. this might even be one of the best times to start a business.

Also, if you wait too long.. you will tire out and maybe even drown out your dream. If you need to itch your bite, then itch it as soon as possible.

Good luck.

If you want to chat.. let me know.